Dow soared 433, advancers over decliners about 4-1 & NAZ climbed 271. The MLP index was off 1+ to the 201s & the REIT index went up 2+ to the 453s. Junk bond funds traded higher & Treasuries were sold, taking the yield on the 10 year Treasury to 2.04%. Oil tumbled 4+ to the 91s on profit taking & gold dropped 19 to 1849 as tensions with Russia eased.
AMJ (Alerian MLP index tracking fund)
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Wholesale prices accelerated again in Jan as strong consumer demand & pandemic-related supply chain snarls continued to fuel the highest
inflation in decades. The
Labor Dept said that its producer price index, which
measures inflation at the wholesale level before it reaches consumers,
surged 9.7% in Jan from the year-ago period, slightly below the
12-year high of 9.8% notched in Nov & Dec. But in an
unexpected turn, prices rose 1% in Jan on a monthly basis – well
above the revised gain of 0.4% in Dec. The forecast expected producer inflation to rise by 9.1% on an annual basis & 0.5% from the previous month. Core
inflation at the wholesale level, which excludes the more volatile
measurements of food & energy, increased 0.9% for the month, well
above the 0.4% estimate. Over the past 12 months core prices were up
6.9% – nearly matching the record level hit in 2021. The surge in wholesale prices comes on the heels of a separate Labor Dept report
released last week that showed consumer prices climbed 7.5% in Jan from the previous year, the biggest increase since 1982, when
inflation hit 7.6%. Consumers are paying more for everyday necessities,
including groceries, gasoline & cars. The
eye-popping reading – which marked the 8th consecutive month the
gauge has been above 5% – will likely amp up pressure on the Federal Reserve
to chart a more aggressive course in normalizing monetary policy. The
central bank is widely expected to raise interest rates in Mar, but
the hotter-than-expected inflation report could mean that policymakers
pencil in a super-sized ½-point hike. Hiking interest rates tends to create higher rates on consumers &
business loans, which slows the economy by forcing them to cut back on
spending.
Wholesale prices jump AGAIN – further evidence of red-hot inflation
Moscow is starting to return some troops at the Ukrainian border to their bases, the Russian gov announced — but Ukraine's pres & Western officials have urged caution over taking Russia's claims at face value. A spokesman for the Russian Ministry of Defense, said troops that had recently been posted to Russia's southern & western military districts, which share a border with Ukraine, had completed their military drills & “have already begun loading onto rail and road transport and will begin moving to their military garrisons today.” He also announced that Russian troops currently engaged in military drills in neighboring Belarus, which shares a border with Ukraine to the latter's north, would return to their permanent bases when the exercises ended on Feb 20. However, in a response to Russia later today, Ukrainian Foreign Minister Dmytro Kuleba said: “We in Ukraine have a rule: we don’t believe what we hear, we believe what we see. If a real withdrawal follows these statements, we will believe in the beginning of a real de-escalation.” Thousands of Russian troops began engaging in military drills last week in a move that was widely seen as a display of strength by Moscow. The drills came as more than 100K soldiers, tanks, missiles & even fresh blood supplies had been moved to Russia's border with Ukraine.
Russia says it’s begun to pull back troops from Ukraine border; NATO urges caution
Treasury yields moved higher, swiftly reversing losses after the Russian Defense Ministry said it had begun returning some troops to their bases. The announcement raised hopes of de-escalating geopolitical tensions near the Ukrainian border after days of warnings of an imminent Russian invasion. The yield on the benchmark 10-year Treasury note rose 3.5 basis points to 2.031% & the benchmark 10-year rate, which stood below the 2% level before news of the pull-out of some Russian troops, had climbed above 2% last week following the hottest inflation reading in 4 decades. The yield on the 30-year Treasury bond traded 2.9 basis points higher at 2.33%. Yields move inversely to prices & a basis point equals 0.01%. Yields moved higher yesterday as St Louis Fed President James Bullard reiterated his call for the central bank to take aggressive steps to fight inflation in the first half of 2022. Bullard said that the Fed should “front-load” the tightening of its monetary policy. Earlier yesterday, yields were lower but came back following comments from Russia’s Foreign Minister Sergey Lavrov to Vladimir Putin that appeared to suggest Russia would continue talks with EU & NATO over Ukraine.
U.S. 10-year Treasury yield tops 2.03% as geopolitical tensions cool, producer prices surge
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